I have resisted blogging on the economic situation. I couldn't be bothered. Reprehensible apathy on my part? No. When you get to a certain age, you have actually lived through the odd real recession of twain. The Oil crisis of the Seventies springs to mind - now that was a real recession - a proper brown trouser job.
There are different definitions of a recession, but here's a reasonable one from The Free Dictionary:
A significant decline in activity spread across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income, and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's GDP.
I have heard reports in the media which take it for granted that we are already in a recession. I suppose we could be, but until there is far more evidence of hard numbers showing this, that is pure guesswork.
In the fourth quarter of 2007, the UK GDP rose by 0.6% as part of a 3.1% growth in 2007.
That's a very long way from a recession. A lull in house prices, a squeeze on the banks and panic in the city does not make a recession.
All right, there may be one starting. But recessions are a relatively normal part of the economic cycle. Let's all grow up and stop panicking. I suspect that many of the media reporters who have hyper-ventilated about a recession haven't actually lived through one as a grown adult.
One thing which confirmed me in my "don't panic" view was the amusing news that the turmoil in the stock markets in the last week or so was stoked, to a significant degree, by the antics of one Jérôme Kerviel at Société générale. You have to laugh.
The story of M. Kerviel is fascinating. He conducted his fraud for no personal profit and at the bank's HQ. That is in sharp contrast to Nick Leeson's misdeeds, which were for personal gain and carried out thousands of miles from the bank HQ. Also, M.Kerviel was operating in a sophisticated and controlled environment, in contrast to the naively loose environment in Barings' Bank when Leeson was doing his stuff.
Katie Allen in the business Guardian details the series of checks and balances that a trader is subject to:
A trader has strict limits on how much can be put at stake in one day. Bank systems flag any breach of those limits with the alert passed to the middle office - the risk-monitoring section of a bank. Middle office will ask the trader for evidence his or her limit has been increased by management. Such checks limits are performed daily.
That's just the start, the list of controls continues, making it all the more extraordinary that Kerviel found a way around them. It seems to have something to do with the fact that he worked previously in the "back office" and therefore knew how to beat the systems. As a result the Financial Services Authority has hurriedly contacted banks to seek reassurances that, among other things, "any back-office staff promoted into trading positions...will be managed closely".
It doesn't inspire confidence does it?